Investors are showing a growing level of confidence in the investment value of Paris real estate.
New figures show that the size of French retail OPCI property funds has surged recently. Their capitalization is forecast to increase from €2 billion to around €10 billion by 2019.
French property regulated funds, OPCIs (organisme de placement collectif immobilier), are a relatively new type of investment vehicle that has transformed real estate business in France since their introduction in 2007. Intended for the general public, their main purpose is the acquisition or construction of properties.
Strong investment value of Paris real estate
The Paris region currently accounts for 55% of all OPCI real estate investments in France.
The five-fold increase in overall OPCI investment is due to a trend in life insurance investment towards unit-linked products, the Paris-based real estate research organization, IEIF (Institut d’Épargne Immobilière et Foncière) told Property Investor Europe Magazine.
“We should double the capitalization of retail OPCIs to €4 billion by the end of 2015 and could reach €10 billion of assets under management within three or four years,” Guy Marty, the Managing Director of IEIF told web portal Business Immo . “This acceleration is already tangible, with inflows this year of €1 billion at the end of May – 90% of this through life insurance products.”
The growing investment value of Paris real estate is partly due to the fact that French life insurance products are divided between low risk euro funds, investing mainly in bonds and paying a minimum guaranteed annual return, and unit-linked products that invest in stocks and other assets. Euro funds have traditionally accounted for the majority but returns have slumped of late due to low interest rates.
Paris real estate is “tangible asset”
“Investment managers are looking to develop unit-linked contracts where real estate could be a solid underlying investment, given that it is a tangible asset generating durable returns. These factors should enable us to attract inflows that will boost AUM (assets under management) in the years ahead,” said Mr Marty.
OPCI funds had, until recently, been slow to win over retail investors. Their €2 billion of AUM is a fraction of investments in other real estate vehicles but the IEIF has reported that the funds started to take off last year, attracting a record inflow of €813 million.
There are currently nine such funds available on the retail market, dominated by Amundi Immobilier’s Opcimmo and AXA’s Selectiv’ Immo.
Enduring value of Parisian property
At Paris56 Real Estate we believe that the growing investment trend by people towards Paris real estate is a solid sign of the enduring value of the capital’s property.
This fact is backed by the IEIF’s reporting that institutional investors have shown no reserve in placing their smart money into real estate. Institutional OPCIs already hold €44 billion of such assets.